A stockholder has sued Flow General Corp. of McLean, alleging that a 1980 new-stock offering by the company was made at "contrived, manipulated and inflated prices."
The plaintiff, William Weinberger of New York City, says in a suit filed Wednesday that he bought 200 shares at the new offering price of 33 3/4 a share. The new offering raised $27 million, and Weinberger, who is seeking to have his suit filed in U.S. District Court here certified as a class action, says "well over 1,000 persons bought the stock under similar circumstances."
Flow General closed today on the New York Stock Exchange at 7 5/8, down 5/8 from yesterday and a new low for the year.
Weinberger's suit grows out of Flow General's recent scrapes with the law. Last month, Flow General, without admitting or denying the allegations, settled a civil complaint brought by the Securities and Exchange Commission. The SEC alleged that, in the prospectus for the 1980 offering, the company failed to disclose that $8 million of the proceeds would be used to acquire Gelman Instrument S.P.A., an Italian subsidiary of Gelman Sciences Inc.
Also last month, the company's subsidiary, General Research Corp., pleaded guilty to criminal charges of conspiring to circumvent federal competitive bidding practices. The Justice Department said the company hired former Army officers with inside information so that General Research could win a $2.6 million military computer contract.
Flow General is a research firm and manufacturer of biomedical and research equipment. About a year ago, Flow's stock climbed to more than $45 a share after the firm got a National Cancer Institute contract to develop interferon, a drug many hope will lead to a breakthrough in cancer treatment. The stock has been dropping in price ever since, however.
In his lawsuit, Weinberger says Flow General should have disclosed its various legal problems in the 1980 prospectus, and that its failure to do so artificially inflated the price of its common stock.
A Flow General spokesman said the company had not seen the suit yet and could not comment on it.
Special correspondent John Kennedy contributed to this article.